Existence uncertainty

Asset definition

30/06/2021 by 75385885

Asset definition

There are two asset definitions in current IFRS Standards, in IAS 38 Intangible assets and in the Conceptual Framework for Financial Reporting. The wording deviated but the meaning is exactly the same, here they are:

IAS 38 Intangible assets

The asset definition as per IAS 38 Intangible assets is as follows – an asset is a resource:

controlled by an entity as a result of past events; and
from which future economic benefits are expected to flow to the entity.

Before providing examples of assets, let’s analyse the asset definition.

Analysis of the asset definition

Outcome uncertainty

23/02/202001/02/2019 by 75385885

Outcome uncertainty is uncertainty about the amount or timing of any inflow/outflow of economic benefits that will ultimately result from an asset or liability.

23/02/202022/02/2019 by 75385885

Existence uncertainty possibly combined with a low probability of inflows or outflows of economic benefits and an exceptionally wide range of possible outcomes,

Rights with potential to produce economic benefits

18/02/202011/02/2019 by 75385885

Introduction – set the stage Rights with potential to produce economic benefits – This is all about: An economic resource is a right that has the potential to produce economic benefits. Many assets, for example, receivables and property, are associated with legal rights, including the right of ownership. In determining the existence of an asset, the right of ownership is not essential; thus, for example, property held on a lease is an asset if the reporting entity controls the benefits which are expected to flow from the property. This emphasises that the resource in question is not, for example, a physical object (such as an item of property, plant and equipment), but a right (or set of rights) over that … Read more

Obligation

04/12/201923/06/2019 by 75385885

Obligations may be legally enforceable as a consequence of a binding contract or statutory requirement. This is normally the case, for example, with amounts payable for goods and services received. However, obligations do not have to be legally binding. If, for example, an entity decides as a matter of policy to rectify faults in its products even when these become apparent after the warranty period has expired, the costs that are expected to be incurred in respect of goods already sold are liabilities. Obligations do not include future commitments. Some liabilities can be measured only by using a substantial degree of estimation. Some entities describe these liabilities as provisions. In some countries, such provisions are not regarded as liabilities because … Read more